Category : Macroeconomics

Iran’s Budget Close Up!

By Mahdi Goodarzi & Mojde Rezaee

President Rouhani submitted the draft of Iran’s Budget Bill for the new Persian calendar year, starting 21 March 2017, to the Majlis on Sunday December 4th. During his speech, two missions were stated as the underlying basis of preparing this draft; the first is to offer services funded by the general budget considering the limitations of resources and the second is to leverage the governmental budget resources to activate the non-governmental sector in order to fuel and boost economic growth and prosperity in Iran’s economy.

“Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country’s other products less price competitive on the export market”

With a rise in commodity prices, it is expected for oil rich nations to witness economic growth and generally a better economic performance. Unless being managed accordingly by adopting adequate and effective policies, such massive revenues will cause irreparable economic catastrophes which had been covered and hidden before. The economic aftermaths for the nation would be abnormal inflation growth, meteoric rise in real estate prices, reduced manufacturing and high unemployment rate which all end in instability and drop by drop will worn out the economy’s infrastructures.

Now it is no news that after JCPoA, cravings towards entering Iran’s capital market was rippling amid foreign merchants and businessmen; a desire based on the unseen potentials that they cannot be ambivalent to. The capital market was not an exception and the visits paid by fund and portfolio managers, investment banks and brokers within the past 2 years proved that they could not afford to overlook the opportunity and lose this golden chance.

Iran plans to unify its dual currency exchange rates with the dollar as a measure to streamline its ailing economy and boost economic growth before the end of Persian calendar year, ending 20th 2017, according to governor of Central Bank of Iran, Valiolah Seif. The move is a major step towards floating the rial after about one decade of state control over the currency market.

Rouhani’s economic team recall the prior financial year as one the severest years in running the country. Now the question is how this difficult year was passed through and what its most important economic bench marks were. Following you can observe some of the economic indices made available by their publishers in Iran.

Justice Shares Scheme in Iran

Supporting low income strata of society and improving income distribution have always concerned governments, economists, and sociologists. Not only is it an economic issue, income distribution is interpreted as one of the major social and political indices. Implementing what is called as the Justice Shares Scheme stood among one of those important attempts. According to this scheme, 40% of total value of divestible companies in each market, as the subject of the second law of Principle 138 of the Iranian constitution and Article 9 of the 4th Development Plan, were decided to be allocated to the 6 low-income categories of the country. In addition, a 50% discount in shares’ prices within a 10 year repayment period, with priority being given to villagers and nomads, was approved for the two lowest brackets.

Age-old Inflation in Iran and its underlying constituents over approximately four decades

Written by Navid Kalhor

Iran’s economy has been undergoing decades of chronic inflation and at some specific intervals experienced hyperinflation (1995 & 2012) due to many structural and built-in economic complications and difficulties, impacted principally by windfalls of oil revenues in the course of OPEQ’s golden years in earlier years or at times of troublesome budget deficits afflicting different administrations in the past decades, remarkably high-rocketed when Rouhani’s predecessor was in charge of the country.

The average inflation in Iran generally hovered around 20% in the past 40 years. Taking into account the average growth in the general level of prices for goods and services in Iran and the major reasons behind losing purchasing power among general public, two factors are essentially deemed to explain the presence of this unwelcome phenomenon, burgeoning the monetary base across the economy.